"Reversion to the extreme
Today's GDP figures confirm that this recession is already on a par with the downturn of the early 1980s, and quite possibly worse. Taken alongside the bad news on the public finances revealed in the Budget, this may go down as the week that defined Britain's political and economic choices for at least a decade.
Take the GDP numbers first. If this preliminary estimate is right, then the economy was 4.1% smaller at the end of March than it was 12 months earlier. That is worse than anything that happened in the early 1990s recession and equals the decline in the last quarter of 1980.
But the pace of the downturn - 3.5% down in the past six months alone - is actually worse than any equivalent period in the early 1980s. In fact, we haven't seen a decline this rapid since comparable records began in 1955, and probably not since the Great Depression.
This is a preliminary estimate, at an unusually difficult time. The estimates for growth in the production sector are based on data covering just the first two months of the year, and the basis for the service sector estimate is even patchier.
We know that several surveys in the past month or so have suggested that the pace of decline is slowing down. If that is true, this early estimate could be revised up, and the first quarter could mark the worst of the recession, as the CBI and others suggest.
But even if that were the case, we could still have many months of declining GDP to go. And there is nothing to stop the pace of the downturn from speeding back up.
The economy shrank by just 0.3% in the third quarter of 1980, after a 2.6% decline over the previous six months. Everyone thought that the worst was over, and it was. But the economy still shrank by another 1.7% in the two quarters after that.
To state the obvious, these figures make the government's forecast of negative growth of 3.5% in 2009 look very difficult to achieve. The borrowing figures already look set to be revised upwards yet again.
But here's the funny thing - as the nation's economic options have shrunk this week, our political landscape seems to have opened up.
Call it "reversion to the extreme". When the economy was booming, it was common to point out how small the differences between the main parties had become.
The realm of the economically possible during that period now looks positively luxurious: our debt level was fairly low, and stable, and tax revenues were pouring in. But back then, the room for manoeuvre from a political standpoint was perceived to be very small.
Take the 2005 election. On the economy, the great dividing line between the parties back then came down to a difference in spending plans of just £12bn. Yes, you did read that right. The Conservatives planned to increase public spending by £12bn less than Labour over the three years after the election, whereas the Liberal Democrats planned to spend about £12bn more.
That seemed a small number even then. In the week when this year's borrowing figure alone was revised up by £57bn, it sounds like an elaborate practical joke.
There are now no good economic options available to a British chancellor. Indeed, with borrowing at this level, there aren't many options at all. Yet listen to the politicians and you would think the opposite.
Suddenly, Labour seems to think it can win support by taxing the rich, after more than 15 years when it was convinced that any such talk would scare voters away.
Likewise, the Conservatives, privately at least, think that the sense of crisis is such that they will be able to pose hard spending choices to the electorate which would have been unthinkable even one year ago.
There's a lot of this story still to play out, on the economy, the budget and everything else. But already the political economy of Britain has been turned on its head."
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